Nvidia Experiences Growth Challenges: Exploring Alternative AI Investments
Nvidia has seen impressive gains, rising 1,480% over the past five years. However, the stock has faced considerable volatility this year, with shares currently down 17% since January 1.
As a key player in the booming artificial intelligence (AI) sector, Nvidia provides powerful graphics processing units (GPUs) essential for running training and inference models. Consequently, its revenue and earnings have surged.
That said, Nvidia is not without risks. An economic downturn could substantially slow its business, while major customers are developing their own chips. Additionally, competition and supply chain issues pose significant challenges.
Amid these concerns, investors may want to consider alternatives. Is now the right time to pivot from Nvidia and invest in other promising AI stocks?
Investing in Established Internet Giants
When researching AI stocks, it’s prudent to look at companies that have historically dominated the internet landscape. Notable examples include Alphabet (NASDAQ: GOOGL) and Meta Platforms (NASDAQ: META). Both companies recently reported first-quarter financial results that exceeded expectations, indicating robust momentum.
Alphabet operates some of the most prevalent online platforms globally, including YouTube, which boasts an estimated 2.5 billion monthly active users.
Meanwhile, Meta’s family of apps reported 3.43 billion daily active users in Q1, an increase of 80 million users in just three months.
These extensive user bases provide Alphabet and Meta a significant advantage in developing and deploying AI products. According to CEO Sundar Pichai, “Fifteen of our products with a half-billion users now use Gemini models,” enhancing user experiences in services like Search and Maps. Mark Zuckerberg, CEO of Meta, remarked on their progress, stating, “We’re making good progress on AI glasses and Meta AI, which now has almost 1 billion monthly actives.” The company is also preparing to release a dedicated AI app.
Both companies are committed to integrating AI features for user benefit while ensuring that advertisers can leverage these technologies in their campaigns.
Robust Financial Resources for AI Investment
Investing in AI infrastructure is capital-intensive. This reality underscores the importance of having financial resources for companies aiming to lead in AI innovation.
In this context, Alphabet and Meta excel. In the first quarter, Alphabet reported net income of $16.6 billion, while Meta’s net income reached $34.5 billion. Their profit margins are notably high.
When examining their financial positions, the two companies collectively hold approximately $125.8 billion in net cash (cash, cash equivalents, and marketable securities, minus long-term debt). This offers them considerable financial flexibility.
Looking forward, Alphabet plans to allocate $75 billion for capital expenditures in 2025, and Meta has raised its target spending range to between $64 billion and $72 billion. While some may question the uncertain returns on this spending, both firms are taking calculated risks to establish themselves as leaders in AI.
Seizing Opportunities in the Current Market
The prevailing economic climate is impacting investor confidence. Caution from risk-averse participants may be warranted.
However, this situation creates openings for investors. Shares of these robust businesses are trading at more favorable valuations. Alphabet’s forward P/E ratio stands at 17, while Meta’s is at 22. Their stock prices are down over 20% from recent peaks, presenting a buying opportunity.
For those looking to invest in AI, examining these technology giants could be worthwhile.
Is Now the Right Time to Invest in Alphabet?
Before investing in Alphabet stock, it’s essential to consider some insights:
The Motley Fool analyst team has identified what they believe are the 10 best stocks to buy currently, with Alphabet not making the list. The selected stocks have potential for substantial returns in the coming years.
For instance, consider when Netflix appeared on this list on December 17, 2004. An investment of $1,000 would now be worth approximately $610,327.* Similarly, had you invested $1,000 in Nvidia when it made the list on April 15, 2005, your investment could be valued at around $667,581.*
It’s important to note that Stock Advisor has delivered an average return of 882%, significantly outperforming the S&P 500’s 161% gain. For insights on the latest recommendations, consider joining Stock Advisor.
*As of April 28, 2025
Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board of directors. Randi Zuckerberg, former director at Facebook and sister to Meta Platforms CEO Mark Zuckerberg, also holds a position on the board. Neil Patel does not hold any positions in the stocks mentioned. The Motley Fool has recommendations for Alphabet, Meta Platforms, and Nvidia.
The views expressed in this article are those of the author and do not necessarily reflect those of Nasdaq, Inc.
